June 13, 2018
India’s M&E industry, which grew at a compounded annual growth rate (CAGR) of 18.6 per cent from 2011-2017 to US$22.8 billion, is expected to expand at a CAGR of 13.9 per cent to touch US$37.6 billion by 2021
Government of India has supported M&E by digitising the TV space, increasing FDI limit to 100 per cent in cable and DTH satellite platforms and granting industry status to the film industry to allow easy funding
India produces as many as 2,000 films annually in more than 20 languages - the largest in the world. Despite high volume, revenue realisation remains far below that in the USA and the UK which produce fewer films
With the a steady rise in internet penetration, digital has recorded strong rise in subscriber addition; As a result, Netflix and Amazon Prime have invested in content generation specifically for the Indian market
India’s Media and Entertainment (M&E) industry is going through its golden phase owing to a rapid expansion in the consumer base, which has attracted investments and collaborations from around the world. India’s fast-growing consumer base, backed by a steady uptake in electricity, satellite and internet connections, has encouraged foreign investors to invest in creation and promotion of content for the local audience across film, television and online mediums. India, a market of 1.3 billion people and 22 official languages, offers unmatched growth opportunities. The country’s M&E industry, which grew at a compounded annual growth rate (CAGR) of 18.6 per cent during 2011-2017 to US$22.8 billion, is expected to grow at 13.9 per cent CAGR to touch US$37.6 billion by 2021. There are myriad factors that have contributed to this growth in India – the world’s largest movie market and the second largest television and internet markets.
Government of India, for instance, has supported the sector by digitising the cable distribution sector to attract greater institutional funding, increasing Foreign Direct Investment (FDI) limit from 74 per cent to 100 per cent in cable and DTH satellite platforms and granting industry status to the film industry for easy access to institutional funding. The policy amendments, along with the enterprise of private Indian players in the entertainment space, have helped in projecting India as a global entertainment hub, thus encouraging flow of foreign investments and international collaborations over the past years. Breaking language barriers and overcoming local technological and marketing challenges, the Indian entertainment industry today is poised to script groundbreaking success stories. Meanwhile, beyond entertainment content, India has also emerged as a preferred location for production works such as visual effects and animation.
India produces as many as 2,000 films annually in more than 20 languages – the largest in the world. Despite the high volume, revenue realisation from India’s vast film industry remains far below the developed markets in the USA and the UK that produce fewer films every year. Hence, a variety of stakeholders have sought to maximise income from the Indian movie industry. According to a joint report by KPMG, a global consultancy firm, and the Federation of Indian Chambers of Commerce and Industry (FICCI) in March 2017, the long-term factors driving future growth in the M&E sector are expected to remain positive, with growing rural demand, increasing digital access, and digitisation of television services in the coming years. A similar study by the Confederation of Indian Industry (CII) and the Boston Consulting Group (BCG) in December 2017, stated that by 2020 every second Indian will have a personal media consumption device.
Such projections hint at string market growth and have elevated India to the status of a critical market for investment in production and promotion of entertainment content. This has been proven through the influx of major foreign production houses–such as 20th Century Fox, Sony Pictures, Warner Bros and Walt Disney Pictures–which seek to develop and market movies in a number of languages. While Fox tied up with Star India in 2008 to create Fox Star Studios to produce and market movies in as many as five languages, Disney acquired a controlling stake in India-based UTV Motion Pictures in 2012 to produce and market content for both big screens and television. Similarly, India-based Viacom 18 had tied up with US’s Paramount Pictures in 2011 to market and distribute movies in India, Bangladesh and Sri Lanka.
Gone are the days when strong income from entertainment meant only the Hindi film industry, popularly known as Bollywood. As a result, Bollywood had become synonymous with Indian film industry. However, over the past decade, foreign investors have evinced interest in movie and television content in regional languages–such as Tamil, Telegu, Bengali, Marathi and Malayalam. India, with its language and cultural diversities offer parallel marketing opportunities for movie producers and distributors who are keen to diversify their portfolios. Parallelly, foreign studios, primarily from the USA, are providing regional Indian audiences with cinematic experiences that were once limited to just English-speaking viewers. Fox Star Studios’ recently released Deadpool 2, for instance, had multiple versions of the trailer – in Hindi, Marathi, Punjabi and Bhojpuri – customised to the tastes of local audiences.
The growth in viewership as well as in number of movie releases has encouraged investment in setting up of multi-screen theaters as well as in upgradation of single screen theaters that dominate the majority of the Indian market. The surge in investment in movie production and distribution will help augment India’s infrastructure in the space which is currently inadequate given the market potential. While India has one screen for around 90,000 people, the USA has one screen for less than 8,000 people. Rising competition and audience traffic has encouraged flexible pricing to suit all movie goers. Additionally, a sharp drop in cost of production and marketing of entertainment content, be it movies or music, has helped curb piracy concern in the entertainment space. Owing to these efforts, the industry, which already employs 1.2 million people, is expected to add 700,000-800,000 new jobs over the next five years.
With the a steady spike in internet penetration, the manner is which Indians consume entertainment content is fast changing. Additionally, digital content has the advantage of accessibility from a variety of devices which has expanded the market outreach. According to a 2018 report by FICCI and Ernst & Young, a global consultancy firm, 250 million Indians viewed online videos in 2017, marking a growth of 64 per cent from 2016 and making the country an attractive hub for global video streaming platforms such as Netflix and Amazon Prime. The USA-based online entertainment giants Netflix and Amazon Prime have invested in content generation specifically for the Indian market in multiple languages. As a result, the portals have recorded steady subscriber growth. The demand has pushed creation of indigenous online entertainment portals such as ALTBalaji, Voot, Hotstar, Eros Now, Sony Liv and dittoTV, which are backed by both new ventures and established studios.
These portals are producing original content as well as offering the latest movies and curated content to its subscribers. Foreign investors have seen opportunities in the Indian digital ventures and pumped money into content production. Star India, backed by 21st Century Fox, recently injected more than US$180 million into its digital content arm that runs video streaming platforms, Hotstar and Starsports.com. According to the FICCI-EY report, digital subscription recorded a strong growth of 50 per cent during 2017. There were around 2 million paid digital subscribers at end-2017, while up to 1.5 million moved to digital-only media consumption. By 2020, around 4 million customers are expected to move to digital-only. This, along with other related avenues of income generation, is expected to create subscription revenue of around US$300 million. Digital has been particularly successful with the young-adult crowd that represents a chunk of online consumers.
India’s consumption market potential has also helped in promoting the local technology and talent in post-production, animation and visual effects works, globally. The animation, post production and special effects segments are expected to grow at a CAGR of 20 per cent to reach US$1.7 billion by 2020. While demand for these specific high-specification works have grown in India’s domestic, film, television and digital markets, a chunk of the demand is claimed by foreign clientele. India houses about 300 animations, 40 visual effects (VFX) and 85 game development studios, according to the 2017 FICCI-KPMG report. These studios have contributed towards the making of some of the most popular entertainment items of all time, including HBO’s Game of Thrones and James Cameron’s masterpiece, Avatar. Technology and talent from India has contributed to movies such as The Jungle Book, Life of Pi, Skyfall, Shrek, How to Train Your Dragon, Maleficent, among others.
As a result of all-encompassing efforts to drive M&E growth, digital-only consumers is expected to grow to 4 million by 2020 from 1.5 million in 2017, subscriber base in digital and pay TV connection is estimated to rise to 20 million by 2020 from 6 million, and just television customer base is expected to expand to 500 million by 2020 from around 200 million. India presently has around 900 licensed private satellite TV channels and growing. Increasing variety in TV content, ranging from private sports leagues to local spin-offs of popular global programmes, have driven interest. With entertainment mediums getting increasingly integrated, viewership has risen in the film and digital space as well. Continuing strength in Indian economy will boost consumer spending on M&E content and services. Rapid urbanisation, youth-heavy population, expansion of satellite and digital networks, rising investments will ensure further growth, asserting confidence in foreign investment.